Making trade work for the Poor

Transcription

1 Making trade work for the Poor Conall O Caoimh Value Added In Africa 2011

2 1 The Theory: Why Trade? 2

3 Why trade? Do both sides make money out of trade? Riceland Beanland 3

4 Benefits of Trade Riceland is twice as good at growing Rice than Beans Beanland is twice as good at growing Beans than Rice Autarchy Rice Beans Riceland 2 1 Beanland 1 2 4

5 Benefits of Trade, 2 Autarchy Specialisation Trade Rice Beans Rice Beans Riceland Rice 2 2 Beanland Bean 2 2 5

6 Unreal Assumptions of the Game Production Pricing Distribution Equal Resources Able to move No cost to move Many producers Equal power Products equally valued Full information No taxes No monopoly power No gender effect Access to resources ( entitlements ) 6

7 How to Keep out the Competition At the Border Behind the Border Taxes Restrictions Production Market Import Tariffs Quotas Subsidise producers Subsidise goods Export taxes Ban (embargo) Training, et al Standards Currency Controls Import Licence Restrict Foreign Companies 7

8 Getting rid of all of those is: Opening Up Trade Remove Taxes Remove Barriers to Market Stop Subsidies Liberalisation 8

9 2 The Evidence: Trade by the poorest countries 9

10 How do you think it is? The Least Developed Countries (LDCs) are the poorest 12% of world population. What products do they export? What % of world trade do they have? Is their trade growing or shrinking? 10

11 Composition of LDC Trade LDC Exports, $ millions, Petrol + Gas = $38,000m

12 LDC Share of World Exports 12% of Pop Source: UNCTAD: LDCs Report,

13 LDC Exports, , Millions $ Source: UNCTAD LDC Report,

14 Expansion of Trade, (long term) Times expansion of Exports China = x 127 Ireland = x 108 Source: Extracted from WTO online database 14

15 Expansion of Trade (recent) 8 Growth in Trade, (times) Source: Extracted from WTO Time Series online database 15

16 3 The Evidence: Is Trade reducing Poverty? 16

17 Impact of Boom Years $1.00 LDC income per person, per day $0.90 $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $ Source: UNCTAD: LDCs Report,

18 LDC people living in poverty Source: UNCTAD: LDCs Report,

19 19

20 Is Trade Reducing Poverty? LDCs Trade Effect on Income Per Capita Rising Ambiguous Falling 12 Based on data in: UNCTAD: LDCs Report,

21 Commodity Terms of Trade: Source: 21

22 Source: IMF, 2002, The Long-Term Behavior of Commodity Prices,

23 4 The Change Needed An Agenda for Trade Justice 23

24 How to Make Trade Fair? 3.1 Change Trade Rules (Political) Build Trade Capacity (Aid) Ethical Trade Movement (e.g. FT) 24

25 Fundamental Injustice of Trade Rules 4.1 Fundamental Unfairness in Rules Opens what we good at ---- Keep Out the Rest Process of making rules thwarted Emergence of Brazil, India, China changing this. But will it help the poorest countries? 25

26 Evidence: Who taxes most? Maximum Tariffs, EU and Sierra Leone, Agricultural The things EU is competitive at, we don t charge taxes. Where the poor are competitive, we tax more, keeping them out Industrial EU Sierra Leone 0 Source: WTO World Trade Report,

27 Where the rules are made EPAs e.g. NAFTA etc FTAs Multilateral Trade Agreements e.g. Euro- Med World Trade Organisation BITs Bilateral Trade Agreements Resource Agreements 27

28 What is traded at trade deals? Rules on Goods and Services Tariff: % reductions Quota reductions Technical standards Which services to open up It is all about opening up reducing restrictions Rules on companies Easier entry requirements Stronger Rules on Patents Stronger Rights for investors Sectors of the economy to open up 28

29 How the Works Rounds of Negotiation 153 Members Mandate Doha Development Round 29

30 WTO Membership 30

31 Processes Reciprocity Non- Discrimination (MFN) Enforcement (Dispute Settlement Mechanism) Rounds Product not Process (Nothing Agreed till Everything Agreed) 31

32 Development Round : Balance of Interests Middle Income Countries Excluded from the dynamic Least Developed Countries: Ag + commoditie s 32

33 4.2 Using Aid to promote pro-poor trade Infrastructure for Trade Transport Communication Electricity, Water, etc Trade Institutions Trade promotion, etc Industry institutions: training, business associations, trade unions Trade negotiation capacity Productive Capacity Adding Value to products Business development production, management, marketing, etc 33

34 Irish Imports from Priority Aid Countries, ValueAddedInAfrica.org Zambia Uganda Tanzania Mozambique 2000 Lesotho Ethiopia Values are in thousands of

35 12,000,000 Tanzania Balance of Trade: Ireland and Tanzania , 10,000,000 8,000,000 6,000,000 Imports Exports 4,000,000 2,000, Sum of Imports Sum of Exports

36 25 Ratio, Irish v Partner exports, , Times Surplus / Deficit 20 Lesotho Malawi 15 Mozambique Uganda Tanzania Sierra Leone 10 Zambia Average 5 0 Lesotho Malawi Mozambique Uganda Tanzania Sierra Leone Zambia Average Note: Ethiopia is not shown. Its ratio is 73:1 in Ireland s favour. -5

37 4.3 Fair Trade Movement Campaigns to have fairer trade rules Ensure farmers rights respected through audit of farms and guaranteed prices. Workers unite to strengthen their negotiating power with bosses Producers strengthening their power in the process Trade Justice Fair Trade Certification Trade Unions Cooperative movement Helps producers in finding buyers for their goods Support to move up the value chain From micro credit and credit unions to investment loans for ethical businesses Watch dog groups who monitor actions of big business Trade Facilitators Value Addition Credit Access Corporate Watch 37

38 I buy Fair Trade Because I believe in Trade Justice 38

39 How Fair Trade Works Community Development Fair Price Independent Audit Standards in the Work Place 39

40 Fair Trade Price World Price FT Guarantee Price FT Price FT Premium 40

41 Fair Trade Price 41

42 What Fair Trade Assures You Social Development Adds Development Small Producers Democracy, Participation, Transparency Socio- Economic Development Premium Price Strengthen the Organisation Environmental Protection Impact Assessment Restricted Chemicals Waste Mgt Soil, Water, Fire Non-GMO Labour Standards Nondiscrimination Freedom of Labour Collective Bargaining Conditions of Employment Health + Safety 42

43 Fair Trade Certified Products Bananas Cocoa Coffee Cotton Flowers Fruit Honey Juices Nuts + Seeds Rice Spices + Herbs Sports Balls Sugar Tea Wine Composite Foods 43

44 5 Moving Up The Value Chain 44

45 Products that Build Communities

46 Aim Reduce Poverty promote sustainable livelihoods through economic growth and employment Mission Facilitate Exports connect African processing companies with buyers and distributors in Ireland

47 1) Poverty reducing 1) Links to local economy 2) VAA not a business development service 1) Keep it simple link with others who build capacity 2) Not a brand nor certificate 3) Philanthropy vulnerable not asking for charity 1) Beneficiary companies part-pay for service 2. Export Ready products 1. Only Value Added goods 3. Business Proposition Point of Difference

48 Theory of Change Processing keeps value in country Research high quality, socially beneficial processed goods Facilitate producers to overcome barriers to market. Encourage business in responsible practice Promote African processed goods among Irish distributers Sustainable livelihoods

49 When Kenya exports coffee roasted, ground and bagged, it earns four times more than when it exports raw beans.

50 Africa Moving Up the Value Chain Traditional Sector Emerging Sector Benefit returns to African communities

51 VAA: The final link in Livelihoods Promotion Return Value to Producers Add Value Design Produce Employ African Producer Build Capacity Skills training Organisation Product Dev. To move up value chain Development Agencies Facilitate entry to market Research products Promote among distributers Facilitate deal Assist communication VAA Consumers choose African processed goods Market

52 Ethical Standards Fair Trade Our priority - certified Will promote Minimum Standard Backed up by 360⁰ Evaluation of practices and impact Not a form of certification Selection Criteria Employment Creation: quality and quantity Women and Marginalised Groups Not weaken food security

53 What Works Naturally pure Ethically produced Creatively designed Competitively priced

54 Success to Date From Big Brand To specialist / gourmet To ex-pat initiated To women's group To community coop

55 Challenges Company Level. Ethical performance Not acceptable to VAA Price Unreal expectations Mzungu price Quality Inconsistent e.g. soap Certification Labelling ingredients, BBD, etc. Packaging Leaking Not up to market Single product Few SKUs / high transaction costs Development Challenges. Demand Side Transit costs Small entry level orders Land-Locked Infrastructure e.g. Ethiopia no LCL Payment costs Bank fees Official exchange rate Supply chain break down UK importer crashed Cultural difference re negotiation Irish buyers don t dance Technical Rules e.g. Honey regime Market structure e.g. Few wholesalers in Ireland for craft Irish Economy Clearing Stock Not consider new products Small quantities Bias Not consider Africa for sourcing 55

56 1. Marketing Support Research products Check ethical Check commercial Marketing Materials Market in Ireland Samples Meet Hold Hands through sale Close of sale Reorder Promotion of goods on market Awareness raising among public 56

57 Understand Trade Patterns Irish Imports from Priority Aid Countries, ValueAddedInAfrica.org What products What processing Zambia Uganda Tanzania Mozambique Lesotho Ethiopia What companies Country case study Why so erratic 57

58 3. Support to Package for Market Irish Designer Professional Pro-bono We support process Communication and MOU They print package Belong to them Only for Co-ops Enhanced for Irish and other markets 58

59 4. Her Command of the Value-Chain Fair Trade Coop Processing factory But no bagging machine Support to outsource bagging Support to market She command her value-chain all the way to supermarket FLO Teabags and roasted coffee Then sweets + cotton sheets 59

60 5. Prepare to Scale Up Consolidate Offer Build Relations Web sales presence Product range Understand Buyers In the mainstream Marketing materials Logistics process Transit costs Survey of purchasing patterns Where buyers already go Target is Europe Quality Profile of products + producers 60

61 Where Focus on East Africa Some products also from Ghana, Lesotho, Madagascar, Cote D Ivoire Open to other African countries Focal sectors: Food Processing Natural beauty products Textiles Gifts Responsive to requests from industry in other sectors

62 133, Capel Street Dublin 1 Ireland. Phone: Mobile: Contact: Conall O'Caoimh (Director) conall@valuleaddedinafrica.org Skype: conall.o.caoimh